How Should Millennials Approach Finances Before Marriage?
Millennials, the generation of young adults born between the years 1981 and 1994 (though there is some debate surrounding that time frame), have faced a slew of challenges while trying to reach financial security. As this generation grows older and moves to new stages of life, the financial challenges don't get any easier as milestones like marriage are crossed. While millennials are experiencing many of the same struggles past generations have, like past generations, they're also experiencing unique circumstances.Here are some financial tips for all the millennials on the road to marriage to help you both manage your money and plan for the future.
Invest in the Future
Maybe you like where your life is right now. You've got a good apartment, just adopted a dog, and are living comfortably within your means, but you never know what the future has in store for you. With shifts in work culture and technology happening in many industries, you could be required to upgrade your education and work skills. One way to prepare yourself and improve your job prospects is to prioritize furthering your education. The more varied and flexible your skills are, the more marketable and attractive you are to prospective employers.This doesn't necessarily mean take out more student loans and get another degree. There are tons of options to explore from online classes and webinars to mentorship or even just reading more on your industry.
Start Building Up an Emergency Fund
The past year has taught us that we need to be ready for the unexpected to happen. You may lose your job and need to change careers, you or your partner could fall ill, or your car's engine might need a repair. Whatever the situation may be, you may not always be in the best place financially to take care of it. This is why building an emergency fund to help give security to you and your partner is essential. You should ideally have three to six months of "bare bones" living expenses put away for this purpose.
Start Saving for Retirement Now
Saving for retirement is your responsibility and your responsibility only. Even with employer-matching 401(k) plans, most of the funding is up to you through tax-deferred salary reductions. With this, the uncertainty of the future of Social Security begs the question of what kind of government-provided retirement benefits will be available in 30-40 years.It may seem like the distant future, but starting now will save you a lot of stress in the future. Remember that what you save during your working years will be your main source of income in retirement, and even if inflation stays down, prices still double around every 24 years which reduces your purchasing power. Your greatest ally in saving for retirement is time. Saving and planning now will help you down the road, so it's important that you and your partner are taking advantage of any employer-sponsored retirement programs or seeking alternative modes of investing.If you change jobs early/often while in your working years, you might consider the option of rolling over your account into an Individual Retirement Account (IRA) or a new company plan. It's tempting to cash in the account, especially if there is only a small amount that has been accumulated, but this would make it taxable immediately. You also run the risk of incurring an early withdrawal penalty.
Credit Cards
As soon as you turn 18, you become the target of credit card companies. By the time you're ready to turn the page to the next chapter in life and get married, you may already have some amount of credit card debt. Credit cards can be a huge convenience, but they have the potential to create a lot of problems. Since payments can span far into the future, over-spending on your card can create an illusion of wealth. Not overspending and paying off the full balance of your card each month is the best way to control your use of credit and avoid falling into high-interest debt.
Where Do I Start?
This might seem daunting now, but having conversations with your partner on these topics and forming a plan now can help you down the road. At NEST Financial, we're here to help every step of the way. Contact us to set up a no-commitment introductory meeting.Find us on:LinkedIn Facebook Yelp Twitter